TD first lookI'd say today's drop is a buying opp.
Capital Power Corp. (CPX-T) C$37.39
Q4/20 Below Forecast as Emissions Offsets Saved for Future Years John Mould, CFA Linda Ezergailis, P.Eng.
Event This morning before market open, Capital Power reported Q4/20 results.
Q4/20 normalized AFFO/share of $0.81 was below our estimate of $0.88 (our forecast matched consensus). The decision to defer utilization of Alberta emissions offsets from 2020 to future years (given a rising carbon price) had a negative impact of $15 million on Q4/20 results (~$0.14/share). This was partially mitigated by corporate costs and sustaining capex that were both below our forecast (positive impact). 2021 financial guidance was reiterated. Conference Call: Today at 11:00 am ET: 1-800-319-4610 (link to webcast).
Impact: NEUTRAL
Although Q4/20 EBITDA was 5% below our forecast, this was mainly driven by a decision by the company to defer the use of Alberta emissions offsets to future years, given the expectation of a rising carbon price. 2020 AFFO of $522 million was slightly below the midpoint of management's $500-$550 million guidance range. The company reaffirmed its 2021 financial guidance.
Details
Q4/20 operating results were modestly below our forecast. Q4/20 EBITDA of $220 million was below both our estimate of $232.8 million and consensus of $241.3 million. We previously updated our forecasts to reflect estimated dispatch levels and realized market prices within the Alberta Commercial segment; EBITDA from this segment would have been in line with our forecast absent the $15 million impact of deferring the use of emissions offsets. Better-than-forecast results from CPX's Ontario & B.C. segment mitigated lower-than-forecast margins within the Alberta Contracted segment.
2021 guidance reaffirmed. Management's 2021 financial targets remain Adjusted EBITDA of $975 million$1,025 million, leading to AFFO of $500 million- $550 million.
Updated 2021-2023 Alberta power hedge parameters. As of December 31, CPX's Alberta Commercial baseload generation was 29% hedged (from 21%) in the low-$60/MWh range (up from high-$50s) in 2021, 27% hedged (from 25%) in the mid-$50/MWh range (unchanged) in 2022, and 21% (from 17%) in the mid- $50/MWh range (up from low-$50s) in 2023.
Liquidity Update. CPX ended Q4/20 with $367 million of cash, and $798 million available under its $1.0 billion in committed credit facilities (maturing in 2024).